Nearing 40 years of experience in the Credit Union Industry, Oak Tree is a leading provider for lending documents and forms for Credit Unions. We provide all types of forms (all types of formats), data linking services, training, compliance support, legal opinion letters, preprinted brochures and documents, as well as web-based and mobile forms. Marketing Services for credit unions also available.
Change may be ahead for credit union commercial lending as the NCUA has proposed a rule in an effort to allow for more business loan approvals. Business Lending is a growing interest to many credit unions, but it is currently limited by statute and regulation. One type of commercial loan, member business loans, in particular, has strict regulations that may soon change. Let’s take a look at NCUA’s Proposed Commercial Lending Rules 2015.
Currently, credit union commercial loans are limited to “1.75 times the actual net worth of the credit union,” or “1.75 times the minimum net worth required . . . for a credit union to be well-capitalized.” The CUMAA required a net worth ratio of 7% in order to be well-capitalized, This effectively created an MBL limit of 12.25% of a credit union’s total assets (1.75 x 7% = 12.25%). The 12.25% limit was explicitly codified the following year by NCUA regulations, which, among other provisions, also created a waiver application process through which borrowers could petition an NCUA Regional Director for relief from the various MBL requirements.”
In July, the NCUA proposed new rules to MBL requirements. These proposed rules would eliminate “prescriptive risk management by loan-to-value ratios, minimum equity investments, portfolio concentration limits for types of loans, and personal guarantees from the principal of the borrower. The need for credit unions to petition for waivers of these requirements would thus also be abrogated.” Instead, the new rule will require credit unions that offer a member business loan to “create a comprehensive written commercial loan policy and establish procedures for commercial lending.” This rule also states that credit unions who have both “assets less than $250 million and total commercial loans less than 15% of net worth, that are not regularly originating and selling or participating out commercial loans, would not be required to create such a commercial loan policy at all.”
The current limit set to credit unions approving a loan is 15% of the credit union’s net worth. With the new proposed rule, a borrower is allowed an additional 10% of a credit union’s net worth as long as the “15% general limit is fully secured at all times with a perfected security interest by readily marketable collateral”.
The National Federal Credit Union states that the “end of the prescribed limit on the non-MBL commercial loans would not only provide necessary regulatory relief for the industry but also allow credit unions much-needed flexibility in their diversification strategies.”
If your credit union is currently processing MBL’s or is considering adding business loans to the mix, Oak Tree Business Systems, Inc. is the best solution for your business lending forms. We have the expertise and the programs to put you into this highly profitable lending area. Visit our Business/Commercial Lending forms page or chat with a forms expert today.
Source: Stephenson, H. Grant, and Hoying, Steven D. “NCUA’s Proposed Rules Concerning Credit Union Commercial Loans” Porter Wright Morris & Arthur LLP, Lexology, 16 Nov. 2015. Web. 20 Nov 2015.
(note: this is an older blog entry and has been edited since originally posted.)
The Telephone Consumer Protection Act (TCPA) was passed in 1991 by the United States in order to protect consumers from solicitations. This act limits “automatic dialing systems, artificial or prerecorded voice messages, SMS text messages, and fax machines.” Although this is not a new act, new guidelines have been provided and it is important for your credit union to know these to avoid legal litigation. In July, the FCC added new guidelines to this act, such as a new definition to autodialers, and exceptions for pro-consumer messages regarding time-sensitive financial information.
The TCPA has a new expanded definition of autodialers. This broadens the scope of what is considered an autodialer to be, as: “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such number.” The FCC has exceptions for pro-consumer messages regarding time-sensitive financial matters. The commission granted financial services permissions to provide consumers with “beneficial, time-sensitive information.”
The FCC approved a petition that was submitted by ABA, which “sought an exemption for financial-related calls or messages concerning: (1) fraud and identity theft; (2) data security breaches of consumers’ personal information; (3) steps taken to prevent or remedy the harm of identity theft or a data breach; and (4) money transfers.
Financial institutions will have to “work with a wireless carrier and third-party service providers to ensure that recipients are not charged for these messages.” The FCC also defines when financial institutions (and, presumably, agents working on behalf of financial institutions) can initiate voice calls or text messages without obtaining prior express consent.
They are allowed to do this so long as:
The communications are sent only to the wireless telephone number that the customer provided to the financial institution;
The communications state the name and contact information of the financial institution (these disclosures must be made at the beginning of a voice call);
The communications do not contain any telemarketing, cross-marketing, solicitation, debt collection, or advertising content;
The purpose of the communication is to alert the customer of (1) fraud and identity theft; (2) data security breaches of consumers’ personal information; (3) steps taken to prevent or remedy the harm of identity theft or a data breach; or (4) money transfers;
The communications are short (one minute or less for voice calls and 160 characters or fewer for text messages);
Financial institutions cannot send more than three communications (voice calls or text messages) per event over a three-day period;
Financial institutions must provide customers with an “easy” means to opt-out of receiving the communication (i.e., an interactive voice or key press-activated opt-out mechanism for voice calls); and
Financial institutions must immediately honor opt-out requests.
In regard to marketing-related calls, credit unions must comply with the following rules before contacting a member:
Members must provide prior express written consent to receive marketing calls, texts, and faxes.
The written consent must clearly disclose that the member is giving consent to receiving the calls, text, or fax and that they are not required to agree to this in order to receive a loan or service from the credit union.
Credit unions cannot use “prior express consent in making telemarketing calls to members.” A credit union must receive new consent from its members as of 2013.
Members have the right to revoke their consent “at any reasonable way and time.”
New Military Lending Act Regulations Recent Changes Regarding Military Lending At Oak Tree Business Systems, Inc., we pride ourselves in maintaining forms that are up to date and compliant across all federal and state guidelines. Well, it is time for us to “up the ante” with this latest regulatory change. Protections have been expanded for active-duty service members and their families according to the revised regulations of the Military Lending Act. Now, loan products offered by credit unions and other depository institutions are covered by these regulations. The new requirements will take effect on October 1 of this year. The mandatory compliance date is October 3, 2016 (and not until October 3 of the following year, and possibly later for credit card accounts).
Why Did The Regulations Change?
The reason for the regulatory change has to do with why the MLA was enacted, to begin with. In 2006, Congress discovered that most active-duty members often looked to subprime lending sources to help them get relief during a financial crisis. Even though the loan provided short-term relief, the high-interest costs associated with carrying the new loan would throw these families into a cycle of unsustainable debt. This added to the stress that service members already feel in general, and this added stress would trickle down to their spouses and children. Therefore, the MLA was established in 2007 to protect service members from predatory lending. The act was specific in that it only applies to active-duty members, and focuses on the following:
Payday loans of under $2000 with terms of 91 days or fewer
Non-purchase money loans with terms of 181 days or fewer secured by a motor vehicle title
Tax refund anticipation loans
The MLA protects the consumer by limiting the interest amount that an institution may charge for these services. This limitation comes in the form of what is known as a Military Annual Percentage Rate, or MAPR. Creditors may not charge more than 36% MAPR. This differs from APR significantly, because finance charges normally excluded under Regulation Z are included under MAPR. The New Changes The new regulation changes extend to all consumer loans, not just short-term payday or tax refund anticipation loans. Under the new rules, the only types of transactions not subject to MLA regulations are:
Dwelling secured loans, including loans to finance the purchase or initial construction of the dwelling, refinance transactions, home equity loans, home equity lines of credit, and first mortgages
Loans to finance the purchase of a motor vehicle when the loan is secured by the vehicle
Loans to finance the purchase of other types of personal property when the loan is secured by the property
So, What Does This Mean?
Essentially, it means that all of your forms must be updated to reflect the new changes, and kept up to date as each phase-in level date is established. You must be familiar with the new regulations to make sure that they are reflected in all of your applicable lending forms. Oak Tree Business Systems, Inc. will do just that. We will make sure that all of your lending forms are correct, include appropriate verbiage, and accurate, up-to-date MAPR so they are in compliance. Oak Tree is a leader in the industry with a proven track record of producing a compliant product every time. Give us a call if you have any questions regarding your forms, or if you are wondering how the new MLA regulations will affect your institution.
(note: this is an older blog entry and has been edited since originally posted.)
The first U.S. credit union opened in 1909. From the beginning, credit unions followed a unique concept. Credit Unions were created not for profit, but to serve members as credit cooperatives. Since then, over 100 years have passed, and there are 6,557 credit unions in the United States serving over 102 million members. Oak Tree wants to celebrate the first 100 years of credit unions’ history by looking back at how credit unions were started.
The Beginning
The creation of credit unions is credited to Friedrich Wilheim Raiffeisen, the major of a small German town whose residents were struggling financially. His idea was to create a small pool of the community’s money that would allow the residents to get small loans at a low-interest rate. This idea later spread to other countries expanding throughout Europe, India, and making its way to Canada in 1901.
Credit unions later expanded into the United States in 1909, with the first credit union opening in New Hampshire. This same year, Massachusetts passes the first state credit union law, which is the Massachusetts Credit Union Act. In the 1920s, credit unions gained popularity in the U.S. as demand for loans grew when people sought loans to buy cars and large household appliances. Credit unions saw a large need in the market for low-interest loans, so they began promoting credit unions to the public, and soon after Massachusetts opened up 19 new credit unions.
By seeing what a great demand there was for credit unions in the market, philanthropist Edward Filene “organized and Roy Bergengren managed a national association—the Credit Union National Extension Bureau—to promote the establishment of credit unions throughout the United States” (NCUA). In 1934 President Roosevelt passed The Federal Credit Union Act. Growth for credit unions was steady during the ’40s, ’50s, and ’60s. In 1970, the National Credit Union Share Insurance Fund allowed federal deposit insurance to be extended to credit unions. Also, in 1970, the NCUA was founded to regulate credit unions.
The 1970s
In 1977, more laws were passed that allow credit unions to offer more services to their members. The ’70s was an extraordinary decade for credit unions, as they nearly doubled the number of credit union members during that period of time. The 1980s showed hard times in the United States with double-digit inflation, a recession, and high-interest rates, but credit unions still continued to grow. Assets grew steadily despite the fact that the number of credit unions dropped due to mergers. The 1990s brought more changes to credit unions with the Membership Access Act and the signing of the Credit Union Membership Access Act by President Clinton in 1998. In 2008, credit unions endured the 2008 recession and by 2014 there were over 100 million credit union members in the United States.
Today credit unions remain strong and follow the same philosophy that they were founded on over 100 years ago.
The distinguishing features include:
Democratic governance
Each member has one vote, regardless of the size of the member’s deposits
Member-elected board of directors
Volunteer-based
Oak Tree is passionate about the credit union movement and has also reached an important milestone. Founded in 1983, we have long been a part of this community and a trusted vendor to hundreds of credit unions across the United States. When you are ready for the best credit union forms available, contact us.
Sources: “A Brief History of Credit Unions.” National Credit Union Administration. Web. 13 July 2015. “Credit Unions: A Timeline (1909-Present).” American Bankers Association. Web. 13 July 2015. “CU History & FAQS.” Carolinas Credit Union League. Web. 13 July 2015. “History of the Credit Union Movement.” Minnesota Credit Union Network. Web. 13 July 2015.
TILA-RESPA Integrated Disclosure requirements go into effect August 1, 2015, but now there will be a good-faith enforcement grace period. The CFPB will be allowing for a TRID enforcement grace period. Stevens said that the grace period allows for institutions that are working in good faith to implement the rule, “the regulatory framework in this country will use what they can to provide instructive guidance during this delay period.” This goes beyond lenders, including “service companies, real estate companies, and third-party vendors” who need to make their systems compliant according to Stevens. This grace period is open-ended and will go to at least the end of 2015. However, this grace period timeline could be extended if needed, depending on how disruptive the new regulatory implementation is.
Cynthia Lowman, president of United Bank Mortgage Corp., pointed out the impact these new rules will have on the entire mortgage-lending industry, and if it is not approached the right way that it “will have a negative impact on consumers, banks, and the recovery of the housing industry.” The main concern with this new rule is the lack of time to “test the new closing process in real-time.” The TRID rule does not provide lenders an opportunity to start using disclosures before August 1, and the fact that lenders are not able to test their systems and procedures ahead of time increases the risks of unanticipated disruptions. This argument leads to the TRID enforcement grace period. This grace period is to ensure that there is a successful implementation of the Rule.
According to Housing Wire, “in May, the House passed H.R. 2213, introduced by Congressman Steve Pearce, R-N.M., and co-sponsored by Congressman Brad Sherman, D-Calif., which prevents enforcement of the integrated disclosure requirements and the filing of any related lawsuit if (1) the person has made a good-faith effort to comply with the requirements, and (2) the conduct alleged to be in violation of the requirements occurred on or before Dec. 31, 2015, thus allowing stakeholders and the CFPB to test the effective operation of the rule.”
Implementation and Transition November of 2013 was a busy time for Federal regulators as they approved final rules combining some of the RESPA rules with other rules still required under The TILA. Congress’s intent is to create an entirely new set of disclosures that when in place, will provide consumers with information (both new & old) formatted in such a way that provides the utmost clarity and consumer understanding. Let’s discuss the New Integrated RESPA/TILA Disclosures.
The new integrated disclosures will fall into two categories (e.g. “Loan Estimate” and “Closing Disclosure”). The “Who, What, When, Where & Why” The new integrated disclosures will need to be provided by creditors or mortgage brokers that receive an application [Emphasis Added] from a consumer for a closed-end credit transaction secured by real property on or after August 1st, 2015. Creditors are prohibited from using the new disclosures for applications that are received prior to that August 1st date and will instead need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms (e.g. Truth-In-Lending disclosures, GFE, Settlement Statements, etc.). The Federal regulators have built in a “transition period” or overlap of time, during which both sets of disclosures will need to be available and creditors will need to use the forms/disclosures that are appropriate to the specific transaction at hand. As applications received prior to August 1st, 2015 are consummated, withdrawn, or canceled, use of the existing GFE, Settlement Statements, and Truth-In-Lending forms will, for the most part, no longer apply. Closed-end reverse mortgages will still be subject to the current disclosure requirements under Regulations X and Z. As this particular “overlap” of disclosures can be particularly tricky, you really need to contact our Client Services Department for full details (Jenny@oaktreebiz.com – 800.537.9598). While August 1st may seem like a long way off, from a practical standpoint it isn’t, and for that reason, the construction of the new forms at Oak Tree is well underway to be certain of their availability in time for the new deadline. Given the size of the new documents and the scope of the transaction-specific information that must be mapped or otherwise programmed by your data processor, once you receive your proofs you will want to approve and return them as quickly as possible.
ELECTRONIC FUND TRANSFER AGREEMENT (REGULATION E) The Electronic Fund Transfer Act is a consumer protection statute that, among other things, limits a consumer’s potential liability for unauthorized transactions made with an approved account access device. The exact amount of the liability is for the most part, determined through the use of a tiered approach that is driven by the time within which a consumer notifies the financial institution. For example, when a consumer notifies a financial institution within two (2) business days after his learning of the loss or theft of the access device, the regulation provides that the consumer’s liability will be restricted to the lesser of $50.00 or the sum of the unauthorized transfers that occur before notice. In the event that the consumer fails to notify the financial institution within two (2) business days after learning of the loss or theft of the access device, the consumer’s liability will increase to the lesser of $500.00, or: (i) $50.00 or the amount of unauthorized transfers that occur within the two (2) business days, whichever is less plus (ii) The amount of unauthorized transfers that occur after the close of two (2) business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period. The consumer may be liable for additional amounts, depending on the specific set of circumstances.
Since this regulation only establishes a consumer’s maximum liability, institutions are permitted to reduce these limits. Such is the case with the Zero Liability Rules that have been issued by both Visa and MasterCard. With respect to MasterCard, their revised zero liability rule now requires that the consumer use reasonable care in safeguarding the Card from loss or theft; and upon becoming aware of such loss or theft, promptly report that loss or theft to the Credit Union.
There’s more detail to be had here (“the fine print”) and we’re always available to pass it along to you. When you use Oak Tree for your credit union document needs, you can be sure we are keeping an eye on these kinds of changes to keep your forms compliant. We will ensure you are ready for the next “New Integrated RESPA/TILA Disclosures”.
(note: this is an older blog entry and has been edited since originally posted.)
Regulation Z Amended Allow for Cure of Qualified Mortgage Points and Fees Violations
2015 Credit Union Regulation Z Changes
There’s welcome news on the residential mortgage lending front. After assessing nearly a year’s worth of real-world experience, the Consumer Financial Protection Bureau (CFPB) came to the conclusion that it had to do something about the reluctance of many mortgage lenders to offer qualified mortgages with points and fees close to the limit imposed by the federal Truth in Lending regulations. Under Regulation Z, in order for a loan of $100,000 or more to meet the qualified mortgage standard, the total points and fees cannot exceed three percent (3.0%) of the total loan amount. For loans less than $100,000, the points and fees cannot exceed the applicable limit described on a graduated dollar/percentage scale. Regulation Z amended to address this.
The CFPB recognized that many lenders have been unwilling to take the risk that a loan intended to be a qualified mortgage might inadvertently exceed the points and fees threshold, and have been either overpricing their loans to account for the higher risk or self-imposing a lower points and fees threshold in order to ensure compliance with the Qualified Mortgage rule. To address this shortcoming, the CFPB amended its qualified mortgage rules by publishing in the Federal Register on November 3, 2014 (79 FR 65300) a Final Rule designed to make it more palatable for lenders to expand their product offerings to cover the full range of points and fees permitted under the qualified mortgage rules. This limited “right to cure” amendment was effective upon publication of the Final Rule.
In the Supplementary Information published with the November 3, 2014 Final Rule, the CFPB noted that “…the complex nature of the points and fees calculation and the potential liability associated with non-qualified mortgages have caused some creditors to impose operational buffers on points and fees that are well under the limits in the rule….” It went on to say that “…creditors that are uncertain of the qualified mortgage status of loans near the applicable points and fees limit may overprice the risk of the loan, passing on the costs of legal uncertainty to the consumer….” Industry sources and the CFPB’s analysis revealed that, rather than incur potential problems with sales to the secondary market, and the greater risk of liability posed by a non-qualified mortgage, many lenders have elected not to offer loans in that price range, or to charge higher rates for qualified mortgages with points and fees near the maximum qualifying limits.
The CFPB concluded that lenders have been unwilling to price loans near the qualified mortgage points and fees threshold because, once a loan has been consummated, it’s too late to make any adjustments to the points and fees. At that point, regardless of the lender’s intent, the loan either is – or isn’t – a qualified mortgage. What was needed was the ability to rectify an inadvertent overcharge. As noted in the preamble to the Final Rule, the CFPB agreed with lending industry groups that allowing a points and fees cure “…would provide creditors the opportunity to achieve precise compliance after consummation, which in turn would allow creditors to approve more loans, or provide loans at a lower cost to, consumers at the boundaries of the points and fees limits under the rule.” From the perspective of the CFPB, an added benefit of the new rule is that “…the cure provision will encourage some creditors to undertake or strengthen rigorous post-consummation review[s] of loans…,” which will result in more consumers receiving cure payments than would otherwise have been the case.
The CFPB amended Regulation Z by adding a new subsection (12 CFR 1026.43(e)(3)(iii)) to provide lenders with “…a limited, post-consummation cure mechanism for loans that exceed the points and fees for qualified mortgages, but that meet the other requirements for being a qualified mortgage loan at consummation.” The new rule, which took effect November 3, 2014, gives lenders greater incentive to offer mortgage products that cover the full qualified mortgage footprint.
The new “points and fees cure” rule gives lenders a window of opportunity after a loan has been consummated to ensure that the total points and fees charged in connection with that loan did not exceed the applicable limits outlined in Regulation Z (§ 1026.43(e)(3)(i)). If a lender determines during its post-closing review that a loan intended to be a qualified mortgage included points and fees that exceed the threshold applicable to that loan, the lender can cure the defect by paying the consumer the amount of the overcharge, plus interest on that amount, within 210 days of loan closing. Payments of an overcharge after 210 days cannot result in a loan being a qualified mortgage.
The rule specifies certain events that can curtail the opportunity for the lender to cure an overcharge during the 210-day window. The lender cannot cure the defect, even if it pays the amount of the overcharge to the consumer if the consumer institutes any legal action in connection with the loan; or if the consumer furnishes a written notice to the lender (or the assignee or servicer) that the total points and fees exceed applicable limits; or if the consumer becomes 60 or more days past due on the loan during the 210-day period. The CFPB’s rationale for terminating the cure option under these circumstances is that if any of these conditions arise during the first 210-days after a loan has been consummated, it wasn’t a qualified mortgage.
Under the new rule, payment to the consumer of the overage plus interest “…may be made by any means mutually agreeable to the consumer and the creditor or assignee, as applicable, or by check” (Regulation Z Commentary, § 1026.43(e)(3)(iii)-1). If payment is made by check, the lender satisfies the requirement by delivering or placing the check in the mail within 210-days after the loan has closed.
The relatively short 210-day window (which is further shortened by the potential for a loan to become 60 or more days delinquent in as little as half that time) means that time is of the essence. To take advantage of the qualified mortgage cure rule, lenders are encouraged to establish post-consummation policies and procedures that expedite the detection of potential points and fee violations. Recognizing that it may not be practical for a lender or assignee to conduct a review of every qualified mortgage, the new rule allows lenders to skip loans where it is confident that the total points and fees are within tolerance and focus only on those where the total points and fees are close to the maximum points and fees thresholds. This is intended to allow lenders to quickly identify and cure problem loans.
With this Final Rule, lenders have the opportunity to fine-tune their qualified mortgage product offerings. A targeted set of policies and procedures that focus solely on the points and fees assessed in connection with a loan can quickly reveal which loans have met that aspect of the qualified mortgage standards, and which have not (more comprehensive loan reviews can be performed under their normal time frames). Lenders can then decide whether to pay the amount of any overcharge to the consumer (along with interest on that amount at the note rate from the date of consummation to the date of repayment), thereby ensuring that the loan is a qualified mortgage, or take no action and assume the risks associated with holding a non-qualified mortgage. But in either case, lenders will know precisely where they stand with respect to their qualified mortgage portfolios and can price loans accordingly.
By providing lenders with the opportunity to take full advantage of the qualified mortgage safe harbor, the CFPB hopes that the new cure provision will result in more consumers receiving loans with better rates, and at lower costs. That’s a win-win situation for lenders and their customers and a welcome change to the regulatory landscape.
By Michael A. Kus, PLLC
(note: this is an older blog entry and has been edited since originally posted.)
Make no mistake – “Quality of Life” drives us all. Our actions each day, sleeping, waking up, eating, working, exercising, socializing, and so very much more, are all motivated by individual day-to-day factors such as being tired, hungry, lonely, wanting better fitness, wanting to “feel” better, and so on. But at the end of the day, what we all want is a better “Quality of Life”; for us and for our loved ones. As a part of the Credit Union Community, it is important to think of the quality of life and the credit union’s contribution to it as it pertains to the members and the staff.
This is exactly what your members are after. Each and every member walking through your Credit Union’s door, calling your Call Center, Emailing you, Chatting with you online, Responding to your Direct Mail – they’re all looking for something they believe will improve their Quality of Life – true needs, true wants, and true desires.
Your Credit Union’s internal policies dictate just how far you can go to respond to your member’s needs, wants, and desires, but within those policies, YOU MAKE A DIFFERENCE!
The Difference
This difference – improving their Quality of Life – can be profound. A safe place to invest their money, a debit/ATM card for safe access to their funds, a credit card for important purchases, an auto loan for a better/safer set of wheels, a home equity loan to access their well earned but unassessed property equity – all ways that YOU can help.
There is a saying that being a professional means doing what you need to do even if at times you don’t really feel like it. Passing through this barrier can indeed help you help others, and improve their Quality of Life along the way. By being there where you are, when you are, fully prepared, and knowing your job better than anyone else, you stand to help improve each and every member’s Quality of Life that you come in contact with.
So make your way through your day, of course working on improving your own Quality of Life, but realize that your members are expecting the same – and doing just that is in your hands.
At Oak Tree, like you, we’re constantly taking stock in our purpose in your day by giving you the very best in easy to use forms that are safe, compliant, and purposeful, making it easier for you to do your part to never miss any opportunity to improve your members “Quality of Life.”
